Werewolves of Inflation

"The government simply budgeted more borrowing…and so the budget
deficit appears lower on paper, even though they borrowed and spent more
than they budgeted! At that ugly news, I found my hands clenching into Powerful
Mogambo Fists Of Outrage (PMFOO)!"

I was still poring over the latest from John Williams at Shadowstats.com,
when I noticed that he wrote that the "Year-to-year change in September retail
sales was a gain of 5.0% versus 3.8% in August, before any inflation adjustments",
but that inflation is getting so bad that it "could wipe out much of the reported
sales gain, after adjustment for pricing increases."

The horror of what he was saying crept into my Puny Mogambo Brain (PMB); people
paid more money, but bought less stuff! Yikes! What in the hell kind of bizarre
economy do you call that?

Now, retail sales picking up like that appears to be healthy economic growth,
until you remember that these are merely raw, nominal sales, which is the same
thing as my wife taking the credit card and charging some clothes, food or
medicine for herself and the kids, and when I open the bill, I thunder, "You
bought food, clothes and medicine last month, too, and not only are you now
buying them more, but you have never spent this much before! Where in the hell
am I supposed to get this much additional money to pay for these additional
frills, you worthless trash?" With a sniff, she says, "They aren't additional
frills! Prices are up so high that I actually bought less stuff, you stupid
creep!"

I decide to ignore this evidence of inflation in prices, and decide that my
wife's explanation seems just a little too glib for me. So I question her further
by saying, "Are you lying to me, you lying, spendthrift witch, who likes to
see me be so poor that I can't afford that snazzy new set of golf clubs that
I need and you deserve to go to hell for it?", and she yells back, "No, YOU
go to hell, you cheap bastard!"

Naturally, I don't accept this kind of underserved criticism, and I scream
back, "No, you go to hell and take those ugly, mutant, halfwit Earthling children
of yours with you!" which causes her to mysteriously get all angry, like I
said something wrong! Even though SHE is the one spending all the money, and
it is ME that is suffering for it! See what kind of silly crap I have to put
up with around here all the damned time?

Mr. Williams appears completely disinterested in how my greedy, hateful family
is spending me into the poorhouse, and actually seems to take their side in
the argument when he says that inflation in prices is pushing up the bills
for everybody for everything, and more and more people and entities are spending
more and more money because prices
are rising so fast.

He even says, probably thinking he was making a wry joke, "As to the happy
news that the gimmicked federal deficit for fiscal year 2007 was just $162.8
billion, versus $248.2 billion in 2006, keep in mind that the gross federal
debt rose by $500.7 billion in the same fiscal 2007, to $9.008 trillion."

Hey! That's right! The government simply budgeted more borrowing, which they
did, and so the budget deficit appears lower on paper, even though they borrowed
and spent more than they budgeted! At that ugly news, I found my hands clenching
into Powerful Mogambo Fists Of Outrage (PMFOO)!

But he was not through with me yet, as he went on to report that the federal
government will find that "the financial statements for the year will show
a deficit based on generally accepted accounting principles likely well in
excess of $4 trillion, come mid-December."

Four trillion bucks a year in current and deferred federal government spending!
A third of GDP! Yikes!

And it gets worse than that, believe it or not, as we learn from Chuck Butler
of Everbank, who reports in his famous Daily
Pfennig missive that (to paraphrase) the economy is crap, and the budget
deficit is going to get worse, in that "Treasury issuance is expected to rise
50% this year! OUCH! It seems the slowdown that no one wants to admit is happening
has reduced tax receipts for the first time since 2003."

And if that was not bad enough, Peter Grandich of the Grandich Letter states
that "state pension plans have deteriorated from a $20 billion surplus in 2001
to a $381 billion deficit last year, according to the National Association
of State Retirement Administrators (NASRA). This deficit means the assets they
have in their portfolios today aren't enough to cover the present value of
the long-term retirement promises they made!"

The skies grow dark and werewolves howl in the distance. Ahhhh-oooooo! Werewolves!
Werewolves of inflation! Ahhhh-ooooo!

Richard Daughty (Mogambo Guru) is general partner and COO
for Smith Consultant Group, serving the financial and medical communities,
and the writer/publisher of the Mogambo Guru economic newsletter, an avocational
exercise to better heap disrespect on those who desperately deserve it. The
Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning, and other
fine publications.